Since the onset of the 21st century, founder of Shriram Group, R Thyagarajan (RT), has taken the financial service activities of the group to dizzy heights.

Shriram Transport Finance Co (STFC), the flagship company of the group, recorded dramatic expansion with total assets handled by the company crossing Rs. 100,000 crore. The expertise built by the group in financing used trucks has been of immense value to several lakh vehicle operators who have high levels of motivation and aspirations but not so much finance. By leveraging this reach, the group expanded into life and general insurance businesses in collaboration with Sanlam Insurance of South Africa.

Most profitable insurers

The record of the insurance companies have been equally spectacular. Shriram General Insurance and Shriram Life Insurance, assisted by Sanlam, emerged as the most profitable entities in the insurance sector. On an investment of around Rs. 400 crore, these have earned profits of about Rs. 425 crore and built a value of around Rs. 15,000 crore. In just six years, the two companies have emerged the most efficient Indian insurance companies. The efficiency of these companies can be best appreciated when one looks at the other insurance businesses that had to employ an additional capital of at least Rs. 2000 crore each and many are still struggling to break even.

STFC is the leader in transport finance - from financing an ambitious truck driver, the company helps him evolve as an entrepreneur expanding into medium and small businesses.

Complementary strengths

Shriram group was conscious of the limitations of its in-house managerial expertise to expand further. Hence RT invited the Piramals to manage the more complex task of sustaining growth over the large base.

In the present structure, Piramal owns 20 per cent of the shareholding; Sanlam, 26 per cent; Shriram Capital, the holding company, around 44 per cent and a global investor, Texas Pacific Group (TPG), holds the balance.

RT points out to the complementary strengths of the three partner companies as the reason for the success of the group. Sanlam’s forte in the insurance business comes in handy for product development, systems and management structures; its global experience have contributed to developing the insurance business in a big way. Piramal’s imprint is visible in its expert handling of the larger size of the business: “Piramal has been strategising the growth of Shriram City Union Finance; their courage to explore new avenues even while exercising caution and their emphasis on perfection have contributed richly,” RT said.

These strengths have been furthered by the vast customer base of the Shriram group of two million truck operators across the country and the group’s ability to assess the credit worthiness of the borrowers, ensure timely disbursals and efficient collections.

Divine discontent...

Thyagarajan carries the persona of divine discontent. Even while the present structure is delivering results, RT, along with his partners, looks for further quantum growth. They are now exploring the prospect of joining hands with IDFC, which has strengths in banking and infrastructure finance. RT believes that such a collaboration can add value to the business, by leveraging the strengths of all the constituents.

RT points to the expertise of IDFC in handling large business transactions and its reach to lakhs of retail clients. “By bringing together these entities, the quality of leadership would get enhanced. The diverse strengths of the constituents will help faster growth of the new enterprise,” says RT.

Is the proposal taking long to conclude? RT explains the complexity of the exercise: “the entities involved are engaged in different businesses; their structures are also different, having listed and non-listed entities. Further, there are issues of regulatory approvals. The process is bound to take time, and none of the promoters is in a hurry. We are confident that once these entities come together, a new large business that would become the leader in the sector will be created,” concluded RT. – SV

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